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October 30, 2014

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North Las Vegas and the Rodney Dangerfield complex

Even in good times, North Las Vegas struggled to be taken seriously. Now, with a projected $33 million budget shortfall, the city’s ability to deliver basic municipal services is threatened. North Las Vegas could fail, and in a highly visible way. The damage, however, would not be confined solely to that city. The collateral damage to Las Vegas, Henderson and the Strip could be significant and lasting. So how did it happen?

In my recent book “Boomburbs: The Rise of America’s Accidental Cities,” I refer to North Las Vegas as suffering from a “Rodney Dangerfield complex” — getting no respect — a phrase that stems from a meeting between former North Las Vegas Mayor Michael Montandon and then-Salt Lake City Mayor Rocky Anderson at a National League of Cities gathering. Montandon approached Anderson to share his experiences in managing a big city, and Anderson, incredulous with the comparison, implied that he ran a real city and that North Las Vegas was only a suburb. Yet, in demographic terms (for instance, the percent of residents who are foreign born), North Las Vegas was substantially more urban and big-city-like than Salt Lake. With 1 in 12 Nevada citizens as residents, North Las Vegas also has substantially more people.

Though it in fact faces significant urban challenges, North Las Vegas lacks urban assets — such as a large commercial sector — to help mitigate its fiscal challenges. This mismatch between needs and resources produces a segregated city with a low fiscal capacity. North Las Vegas faces disparities between its lower-income neighborhoods east of Interstate 15 and new growth areas west of I-15. It is important to note that there are distressed parts of Las Vegas, Henderson and unincorporated Clark County; however, the share of such neighborhoods relative to wealthier sections and business centers is greater in North Las Vegas, resulting in less resources and tax capacity per person.

North Las Vegas’ older east neighborhoods lack homeowners associations and cost the city more in code enforcement, municipal services and employees, all of which lead to higher taxes. Booming master-planned community growth during the past decade in a project such as Aliante was once viewed as a fiscal solution, but the subsequent recession set North Las Vegas up as ground zero for the home foreclosure crisis. Overall, the city’s tax base shriveled as real estate values fell 65 percent from their peak. Keep in mind that this all occurred in a city already burdened with weak tax capacity.

For years, Southern Nevada enjoyed a national identity as the fastest growing large metropolitan area in the country. Our recent riches-to-rags decline has similarly caught the attention of the world with local, national and international media outlets documenting the region’s striking reversal of fortune. The failure of North Las Vegas would be a visible reminder that the fallout from the Great Recession continues and could become a metaphor for the diminished opportunties of the region as a whole.

There are options, all of which need to be considered to avoid a public relations disaster that could affect Southern Nevada’s fragile recovery. Damage from failure would severely affect the reputation of the region’s business climate. North Las Vegas could fail at the very moment the state launches its new regional development authorities.

Also, North Las Vegas contains roughly half the remaining developable land in the valley, and thus its future is the region’s future in a direct sense. Fitch just dropped the city’s bond rating from an “A” with a “negative outlook” to a “BBB” with a “negative watch.” That is equivalent to a three-step drop. The switch from a negative outlook to a watch means the rating agency is waiting for the next shoe to drop. That means the city will now face higher borrowing costs and that all future growth in the city — the one with half our buildable land — will be more expensive, putting the whole region at a distinct competitive disadvantage relative to our competitors in places such as Phoenix and Salt Lake.

State and city officials should take action to prevent North Las Vegas from financial failure and reneging on any of its fiscal obligations — or letting Fitch’s next shoe drop. Possible steps include union concessions, merging of municipal services, massive layoffs to public employees and even some direct cash assistance from the state.

Of course, these are not simple solutions. Unions are actively resisting major concessions, and discussions to merge municipal services with other jurisdictions have broken down. There is an option worth seriously considering. Nevada will receive close to $60 million in direct state funds as part of a $25 billion, 49-state settlement with major banks in a lawsuit from unlawful foreclosures. The intention is to use these resources to prevent future foreclosures through credit counseling and similar programs. North Las Vegas is eligible for funding, provided it applies the funds in specific areas.

Political leaders from both parties could support a plan to designate a portion of the funds directed to municipalities that are the most affected by the foreclosure crisis. The bottom line is that Nevada’s leaders need to think creatively and determine the best use of this windfall resource in order to protect any locality from long-term economic failure.

North Las Vegas was always the urban “canary in the coal mine” — the place most likely to fail in the face of a deep recession. The city did grant what are objectively generous salaries and benefits to municipal employees in the good years. But look around the valley — so did Clark County, Las Vegas and Henderson. The real difference is that these other jurisdictions also had greater resources to cover their commitments when the housing bubble burst.

All of Southern Nevada has a stake in not letting the state’s third largest city fail. Yes, the politics are difficult. The perception that the city deserves to fail is palpable. But cooler heads must prevail. The negative image of failure is in no one’s interest, including the city’s harshest critics. Failure to act may mean that Las Vegas writ large could soon suffer from a collective Rodney Dangerfield complex, and we already don’t get much respect.

Robert E. Lang is a professor of urban affairs at UNLV’s Greenspun College of Urban Affairs and is the executive director of the Lincy Institute.

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